Megha Airways looks to sell majority stake

Promoter of the Hyderabad-based regional airline, which got ministry nod last month, is in talks with Megha Engg for stake sale.

HYDERABAD: Vankayalapati Umesh, promoter-director of Turbo Megha Airways, is in talks with Hyderabad-based Megha Engineering and Infrastructures to sell a majority stake in the regional airline. "MEIL (Megha Engineering and Infrastructures) has shown interest and talks are currently on," Umesh told ET. "We expect to close the deal in a month or so."

Turbo Megha Airways is one of six airlines that received approval from the civil aviation ministry last month. Telugu actor Ram Charan Tej is its other director. "We are currently doing due diligence," MEIL managing director PV Krishna Reddy said. "Given the turbulent nature of the Indian and global aviation industry, where most players are bleeding, we want to take a cautious call only after an extensive due diligence process, which should take few more weeks to complete."

MEIL, which has an order book of Rs 25,000 crore, is a customer of Umesh's charter aircraft firm Turbo Aviation. MEIL had reported a revenue of Rs 6,000 crore for the year ended March 2014.

According to Umesh, the airline needs at least Rs 70 crore to begin operations with three short-haul turbo prop aircraft in the first year, and an investment of at least Rs 15 crore per aircraft thereafter.

"I have the required domain expertise and operational capabilities but certainly not the financial muscle," Umesh said, adding, "Hence the talks with my large customers of charter aircraft for equity investment."

The 45-year-old aviation engineer said his airline needs deep pockets to pump in funds, given the long gestation involved in breaking even. He said he had informed most customers of his charter aircraft service about his stake sale plan. According to Umesh, once a deal is through, his stake in the airline will reduce to about 30% while Tej's will be about 15%.

Turbo Megha will be the second regional airline from Hyderabad after Air Costa, which commenced operations in October last year. It has identified 18 tier-II towns and cities in the south for operations.

The airline is in talks with Brazilian aerospace company Embraer and French-Italian aircraft manufacturer ATR to enter into lease agreements for at least three aircraft by year-end.

Dhiraj Mathur, executive director for aerospace and defense leader at PwC, said, "Regional airlines from tier-II towns feeding the hubs is the only way to help the overall aviation market to grow, where the market is confined to the main trunk routes so far. However, there are several challenges and one of the ways for the regional airlines to address them is getting the right sized turboprop aircraft for short-haul operations."